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Russia’s inflation crashes to 4.3%, far better than target

Russia’s inflation crashes to 4.3%, far better than target

Russia recorded only a 0.1% growth in prices in March, bringing the annualised rate of inflation at the start of April down to 4.3%.

This is far better than even the most optimistic forecasts of just a few weeks ago.  Last year the Central Bank was forecasting that inflation would be running at an annualised rate by the end of April.

Even so notable an economic pessimist as former Finance Minister Kudrin is now admitting that inflation will fall to the target of 4% by the beginning of the summer.  With Russia usually experiencing falling inflation and even zero inflation during the summer months, it is highly likely that inflation will end the year well below the 4% target.  Kudrin is also predicting that the Central Bank will cut its key lending rate to 8% by the end of the year.

With oil prices still above $50 a barrel there is also a strong prospect that Russia’s budget deficit will be lower than anticipated this year, and that the budget might even balance.

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With inflation and interest rates falling faster than anyone anticipated there is also now a high possibility that overall growth may start to accelerate in the second half of the year, with the fall in real incomes which began with the start of the inflation spike in the second half of 2014 finally coming to an end, in good time for the Presidential election in the spring of 2018.

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